Retail Fraud

By:  Mark J. Mandell

Lengthy streams of 1’s and 0’s are behind a new area of retail fraud that is taking the nation by storm. With many cash-strapped state governments looking anywhere they can for money, some have come across a tax exploit that a large amount of cash retailers are using to their advantage.

Labeled as a “Tax-Zapper”, this new form of software allows cash businesses to under-report taxable sales and pocket government money. The Zapper software is typically stored on a thumb drive and after the close of a business day is plugged into the cashier’s computer. It then subtracts a total amount, such as $500 dollars, from the day’s sales and recalculates the receipts to conform to the new number.

The software allows the daily customer to remain unaffected, as their receipts are printed out using the true value of the products purchased. However, the new set of ‘books’ and receipts created by the software are sent to the IRS and typically vastly understate actual profit. 

Five states- Florida, Georgia, Maine, Utah and West Virginia have all enacted laws cracking down on the software. It’s estimated that a significant portion of cash businesses, such as those in the restaurant industry, are utilizing this type of retail fraud. In California, the loss from Zappers in 2009 was estimated at $2.8 billion dollars….from the restaurant industry alone!

Maine’s law makes the installation of such software punishable by up to five years in jail and a $5,000 fine. Although only a select number of states have responded to the problem, Max Behlke of the National Conference of State Legislature’s policy department stated, “We’re going to have a huge inundation of these bills next year.”

We can only hope the State of Michigan follows suit.

To learn more and see the original article, please visit: http://www2.tbo.com/news/breaking-news/2012/apr/03/florida-other-states-target-retail-tax-cheating-so-ar-388069/#fbcomments